SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
INFORMIX CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
[INFORMIX LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JULY 16, 1998
11:00 A.M.
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Informix
Corporation, a Delaware corporation ("Informix" or the "Company"), will be held
on Thursday, July 16, 1998, at 11:00 a.m., local time, at Hyatt Rickey's, 4219
El Camino Real, Palo Alto, California for the following purposes:
1. To elect two (2) directors to Class II of the Company's Board of
Directors to serve until the expiration of their terms or until their
successors are duly elected or appointed and qualified;
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the Company for the fiscal year ending December 31, 1998;
and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only holders of Common Stock of the Company
of record at the close of business on June 8, 1998 are entitled to notice of and
to vote at the meeting. Holders of shares of the Company's Series A-1
Convertible Preferred Stock or Series B Convertible Preferred Stock are entitled
to notice of, but not to vote at, the meeting.
All stockholders are cordially invited to attend the meeting in person. To
assure that holders of Common Stock are represented at the meeting, however,
such holders are urged to mark, sign, date and return the enclosed Proxy as
promptly as possible in the postage-prepaid envelope enclosed for that purpose.
HOLDERS OF COMMON STOCK MAY REVOKE THEIR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE ANNUAL
MEETING. ANY HOLDER OF COMMON STOCK ATTENDING THE ANNUAL MEETING MAY VOTE IN
PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY.
For the Board of Directors
INFORMIX CORPORATION
/s/ Gary Lloyd
Gary Lloyd
SECRETARY
Menlo Park, California
June 15, 1998
YOUR VOTE IS IMPORTANT. IN ORDER TO ASSURE THEIR REPRESENTATION AT THE
MEETING, HOLDERS OF COMMON STOCK ARE REQUESTED TO COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE.
INFORMIX CORPORATION
----------------
PROXY STATEMENT
FOR THE 1998 ANNUAL MEETING OF STOCKHOLDERS
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
INFORMIX CORPORATION, a Delaware corporation ("Informix" or the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
Thursday, July 16, 1998, at 11:00 a.m., local time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at
Hyatt Rickey's, 4219 El Camino Real, Palo Alto, California. The Company's
principal executive offices are located at 4100 Bohannon Drive, Menlo Park,
California 94025, and its telephone number at that address is (650) 926-6300.
When proxies are properly dated, executed and returned, the shares of Common
Stock they represent will be voted at the Annual Meeting in accordance with the
instructions of the stockholder. If no specific instructions are given, the
shares will be voted (i) for the election of the nominees for Class II directors
of the Company's Board of Directors set forth herein, (ii) for the ratification
of the appointment of KPMG Peat Marwick LLP as independent auditors as set forth
herein, and, (iii) at the discretion of the proxy holders, upon such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
These proxy solicitation materials and the Annual Report to Stockholders for
the year ended December 31, 1997, including financial statements, were first
mailed on or about June 15, 1998 to all stockholders entitled to vote at the
Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
The holders of Common Stock of the Company of record at the close of
business on June 8, 1998 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting. At the Record Date, the Company had issued and
outstanding and entitled to vote 167,854,838 shares of Common Stock, $0.01 par
value. In addition, at the record date, the Company also had issued and
outstanding 50,000 shares of Series B Convertible Preferred Stock, $0.01 par
value (the "Series B Preferred"). At the record date there were no shares issued
and outstanding of Series A-1 Convertible Preferred, $0.01 par value (the
"Series A-1 Preferred"); however, at the Record Date the Company had issued and
outstanding a warrant to purchase up to 80,000 shares of Series A-1 Preferred.
The holders of the Series A-1 Preferred and the Series B Preferred are entitled
to notice of, but not to vote at, the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the General Counsel of the Company at or before the taking of the vote at
the Annual Meeting a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the General Counsel of the Company at or before the taking of
the vote at the Annual Meeting or (iii) attending the Annual Meeting and voting
in person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be delivered to Informix Corporation at 4100 Bohannon
Drive, Menlo Park, California 94025, Attention: General Counsel, Legal
Department, or hand-delivered to the General Counsel, Legal Department at or
before the taking of the vote at the Annual Meeting.
VOTING
Each share of Common Stock outstanding on the Record Date is entitled to one
vote. Stockholders' votes will be tabulated by persons appointed by the Board of
Directors to act as inspectors of election for the Annual Meeting. Abstentions
are considered shares present and entitled to vote and, therefore, have the same
legal effect as a vote against a matter presented at the Annual Meeting. Any
shares held in street name for which the broker or nominee receives no
instructions from the beneficial owner, and as to which such broker or nominee
does not have discretionary voting authority under applicable New York Stock
Exchange rules, will be considered as shares not entitled to vote and will
therefore not be considered in the tabulation of the votes but will be
considered for purposes of determining the presence of a quorum. Holders of
shares of the Series A-1 Preferred or the Series B Preferred are not entitled to
vote such shares at the Annual Meeting.
SOLICITATION OF PROXIES
The expense of soliciting proxies in the enclosed form will be borne by the
Company. In addition, the Company may reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries representing beneficial owners of shares
for their expenses in forwarding soliciting materials to such beneficial owners.
Proxies may also be solicited by certain of the Company's directors, officers
and employees, personally or by telephone, telegram, facsimile or other means of
communication. No additional compensation will be paid for such services.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholders are entitled to present proposals for action at a forthcoming
meeting if they comply with the requirements of the proxy rules promulgated by
the Securities and Exchange Commission (the "Commission"). Proposals of
stockholders of the Company intended to be presented for consideration at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company no
later than February 15, 1999 in order that they may be included in the proxy
statement and form of proxy related to that meeting.
2
PROPOSAL ONE
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and Amended
Bylaws provide that the Board of Directors shall be divided into three classes,
each class consisting, as nearly as possible, of one-third of the total number
of directors, with each class having a three-year term. Vacancies on the Board
may be filled only by persons elected (i) by the affirmative vote of the holders
of the then-outstanding shares of voting stock of the Company entitled to vote
generally in the election of directors and voting together as a single class or
(ii) by a majority of the remaining directors. A director elected by the Board
to fill a vacancy (including a vacancy created by an increase in the Board of
Directors) shall serve for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor is
duly elected and qualified.
There are currently six members of the Board of Directors. Class I presently
consists of two directors who are serving three-year terms expiring in 2000.
Class II presently consists of two directors whose three-year term will expire
as of the Annual Meeting. Class III presently consists of two directors who are
serving three-year terms expiring in 1999. At each annual meeting of
stockholders, directors elected to succeed those in the class whose terms expire
will be elected for three-year terms so that the term of one class of directors
will expire each year. In each case, a director serves for the designated term
and until his or her respective successor is duly elected and qualified, or
until any such director's death, resignation or removal.
Two Class II directors are to be elected at this Annual Meeting to serve
three-year terms expiring in 2001. The Nominating Committee of the Board of
Directors has nominated James L. Koch and Thomas A. McDonnell for election to
the Class II board seats (collectively, the "Class II Nominees"). Shares
represented by the accompanying proxy will be voted for the Class II Nominees,
unless the proxy is marked in such a manner as to withhold authority so to vote.
If any of the nominees is unable or declines to serve as a director at the time
of the Annual Meeting, the proxy may be voted for a substitute nominee or
nominees designated by the present Board of Directors to fill the vacancy. It is
not presently expected that any of the Class II Nominees will be unable or will
decline to serve as a director.
The names of the Class II Nominees and the Company's other current directors
and certain information about them as of June 15, 1998 are set forth below.
Information as to the stock ownership of each director and all current directors
and executive officers of the Company as a group is set forth below under
"Security Ownership of Management and Certain Beneficial Owners."
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY DIRECTOR SINCE
- - ---------------------------------------- --- -------------------------------------------------- ---------------
CLASS I DIRECTORS
Leslie G. Denend...................... 57 Director 1997
Cyril J. Yansouni(1)(2)............... 56 Director 1991
CLASS II DIRECTORS
*James L. Koch(1)(2).................. 54 Director 1991
*Thomas A. McDonnell(1)(2)(3)......... 52 Director 1988
CLASS III DIRECTORS
Albert F. Knorp, Jr.(2)(3)............ 62 Assistant Secretary and Director 1984
Robert F. Finocchio................... 47 Chairman, President and Chief Executive Officer 1997
- - ------------------------
* Nominee for Class II Director
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Nominating Committee
3
LESLIE G. DENEND has served as a member of the Company's Board of Directors
since December 1997. Since December 1997, Mr. Denend has served as President of
Network Associates, Inc., a provider of network security and management
software, that resulted from the merger of McAfee Associates, Inc. and Network
General Corporation ("Network General"). From June 1993 to December 1997, Mr.
Denend served as President and Chief Executive Officer of Network General. He
also served as Network General's Senior Vice President of Products from February
1993 to June 1993. From November 1990 to December 1992, he was President of
Vitalink Communications, a manufacturer of networking products. From January
1989 to October 1990, Mr. Denend served in a variety of positions at 3Com
Corporation, a global data networking company ("3Com"), most recently as
Executive Vice President for Product Operations. Mr. Denend is also a director
of Rational Software Inc., a provider of component-based development software
systems, and Proxim, Inc., a designer of wireless local area networking
products. Mr. Denend is a graduate of the United States Air Force Academy and
holds an M.B.A. and Ph.D. in economics, public policy and business from Stanford
University. Mr. Denend was also a Fulbright Scholar in economics at Bonn
University.
CYRIL J. YANSOUNI has served as a member of the Company's Board of Directors
since May 1991. Since March 1991, Mr. Yansouni has been the Chief Executive
Officer and Chairman of the Board of Directors of Read-Rite Corporation, a
manufacturer of thin film magnetic recording heads. He also is a member of the
Advisory Board of both the Leavey School of Business Administration at Santa
Clara University and the San Jose State University School of Engineering. Mr.
Yansouni is a director of PeopleSoft, Inc., a provider of client/server business
software, Raychem Corporation, an international manufacturer and marketer of
products for electronics, industrial and telecommunications applications, and
ActivCard, a French company that develops authentication communication software.
Mr. Yansouni holds a B.S. in electrical and mechanical engineering from the
University of Louvain, Belgium and an M.S. in electrical engineering from
Stanford University. In addition, he attended the executive management program
at Stanford University.
JAMES L. KOCH has served as a member of the Company's Board of Directors
since May 1991. Since July 1990, Mr. Koch has served in various positions at
Santa Clara University. Since February 1997, Mr. Koch has been its Director of
the Center for Science, Technology and Society and, since July 1990, a Professor
of Management and Corporate Strategy. In addition, from July 1990 to July 1996,
Mr. Koch served as Dean of the Leavey School of Business Administration at Santa
Clara University. Mr. Koch holds a B.A. in business administration from San
Francisco State University and an M.B.A. and Ph.D. in business administration
from the University of California, Los Angeles.
THOMAS A. MCDONNELL has served as a member of the Company's Board of
Directors since February 1988. Since 1971, Mr. McDonnell has served as Chief
Executive Officer of DST Systems, Inc. ("DST"), a transfer agent for mutual
funds, stocks and bonds, and since October 1984 as a director of DST. Mr.
McDonnell is also President of DST, a position he has held since 1973; Mr.
McDonnell also served as Treasurer of DST from 1973 to September 1995. From
August 1983 to November 1995, Mr. McDonnell was Executive Vice President and a
director of Kansas City Southern Industries, Inc., a holding company and the
former parent of DST. Mr. McDonnell is also director of BHA Group, Inc., a
manufacturer of pollution control devices, Cerner Corporation, a provider of
software and technology to the health care industry, Computer Sciences
Corporation, an information technology company, Euronet Services, Inc., an
operator of automatic teller machines, Janus Capital Corporation, a registered
investment advisor, and Nellcor-Puritan-Bennett Corporation, a medical device
company. Mr. McDonnell holds a B.S. and B.A. in accounting from Rockhurst
College and an M.B.A. from the Wharton School of the University of Pennsylvania.
ALBERT F. KNORP, JR. has served as a member of the Company's Board of
Directors since 1984 and as its Assistant Secretary since 1985. Mr. Knorp is a
general partner in Seaport Ventures, L.P., a family partnership. Since November
1994, Mr. Knorp has been of counsel to the law firm of Gray Cary Ware &
Freidenrich. He had previously been a partner in the law firm of Lewis, Knorp,
Walsh & Kavalaris. Mr. Knorp holds a B.A. in social sciences from Stanford
University and an L.L.B. from Santa Clara University.
4
ROBERT J. FINOCCHIO, JR. has served as the Company's Chairman, President and
Chief Executive Officer since July 1997. From December 1988 until May 1997, Mr.
Finocchio was employed with 3Com where he held various positions, most recently
serving as President, 3Com Systems. Prior to his employment with 3Com, Mr.
Finocchio held various executive positions in sales and service with Rolm
Communications, a telecommunications and networking company, most recently as
Vice President of Rolm Systems Marketing. Mr. Finocchio also serves as a
director of Latitude Communications, a teleconferencing company. Mr. Finocchio
is also a Regent of Santa Clara University. Mr. Finocchio holds a B.S. in
economics from Santa Clara University and an M.B.A. from the Harvard Business
School.
There is no family relationship among any of the directors or executive
officers of the Company.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Class II directors will be elected by a plurality of the votes of the shares
present and entitled to vote at the Annual Meeting and entitled to vote on the
election of directors. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE CLASS
II NOMINEES AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES.
BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held 31 meetings during the fiscal year
ended December 31, 1997. No incumbent director during fiscal 1997 attended fewer
than seventy-five percent (75%) of the aggregate of (i) the total number of
meetings of the Board of Directors held during the period for which such person
was a director and (ii) the total number of meetings held by all committees of
the Board of Directors on which such person served (during the period such
person served). The Board of Directors has standing Audit, Compensation and
Nominating Committees.
The members of the Audit Committee during fiscal 1997 were Albert F. Knorp,
Jr., James L. Koch, Thomas A. McDonnell and Cyril J. Yansouni. The Audit
Committee held six meetings during fiscal 1997. The purposes of the Audit
Committee are to review with the Company's management and independent
accountants such matters as internal accounting controls and procedures, the
plan and results of the annual audit and suggestions of the accountants for
improvements in accounting procedures; to nominate independent accountants; and
to provide such additional information as the committee may deem necessary to
make the Board of Directors aware of significant financial matters which require
the Board's attention.
The members of the Compensation Committee during fiscal 1997 were James L.
Koch, Thomas A. McDonnell and Cyril Yansouni. The Compensation Committee held
six meetings during fiscal 1997. The purposes of the Compensation Committee are
to review and approve the compensation to be paid or provided to the Company's
executive officers, the aggregate compensation of all employees of the Company
and to administer the Company's 1994 Stock Option and Award Plan (the "1994
Plan"). Robert J. Finocchio, Jr., Chairman, President and Chief Executive
Officer of the Company, participates in all discussions regarding the
compensation of all officers of the Company but is excluded from discussions
regarding his own salary and incentive compensation.
The members of the Nominating Committee during fiscal 1997 were Alfred F.
Knorp, Jr. and Thomas A. McDonnell. The Nominating Committee held two meetings
during fiscal 1997. The purpose of the Nominating Committee is to seek qualified
candidates for nomination and appointment to the Board of Directors. During
fiscal 1997, the Nominating Committee nominated Leslie G. Denend and Robert J.
Finocchio, Jr. for appointment to the Board. In February 1998, it nominated
James L. Koch and Thomas A. McDonnell for re-election to the Board as Class II
directors. The Nominating Committee will consider the names and qualifications
of candidates for the Board submitted by stockholders in accordance with the
procedures set forth in "Deadline for Receipt of Stockholder Proposals for 1999
Annual Meeting" above and in the Bylaws of the Corporation.
5
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during fiscal 1997 were James L.
Koch, Thomas A. McDonnell and Cyril J. Yansouni. Messrs. Koch, McDonnell and
Yansouni were not at any time during the Company's 1997 fiscal year or at any
other time an officer or employee of the Company. No executive officer of the
Company serves as a member of the board of directors or compensation committee
of any entity which has one or more executive officers serving as a member of
the Company's Board of Directors or Compensation Committee.
DIRECTOR COMPENSATION
Employee directors do not receive any additional compensation for serving as
a director. For the fiscal year ended December 31, 1997, the Company paid each
non-employee director a quarterly fee of $2,000 and an additional fee of $1,000
for each Board meeting attended. In addition, members of the Audit and
Compensation Committees received $500 for each committee meeting attended;
members of the Nominating Committee do not receive additional compensation for
their attendance at committee meetings. For the year ending December 31, 1998,
the outside directors will continue to receive the same compensation as they
received in 1997. The Company reimburses each member of the Company's Board of
Directors, whether or not an employee, for out-of-pocket expenses, including
travel expenses, incurred in connection with attending Board meetings. In
addition, from time to time, the Company invites the directors' spouses to
accompany the directors to board meetings, and, when invited, the Company also
pays the travel expenses incurred by the spouses. In 1997, these spousal travel
expenses were less than $10,000 per director.
The Company's 1989 Outside Directors Stock Option Plan (the "Director Plan")
provides for the grant of options to non-employee directors pursuant to an
automatic, nondiscretionary grant mechanism. Each non-employee director is
automatically granted an option to purchase 15,000 shares of Common Stock upon
initial election to the Board of Directors and an additional option to purchase
15,000 shares upon re-election. The Company has a staggered board, with each
director serving for a three year term. Each such option is granted at the fair
market value of Common Stock on the date of grant. Options granted under the
Director Plan become exercisable over three years with one-third of the shares
vesting on each anniversary of the grant date.
6
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock and Series B Preferred Stock as of March
31, 1998 by (i) each person or entity who is known by the Company to own
beneficially 5% or more of the Company's outstanding Common Stock or Series B
Preferred Stock, as the case may be; (ii) each director of the Company; (iii)
the Company's Chairman, President and Chief Executive Officer; (iv) each of the
Company's four most highly compensated executive officers other than its Chief
Executive Officer who were serving as officers of the Company at the end of the
fiscal year ended December 31, 1997 and whose salary and bonus for fiscal 1997
exceeded $100,000; (v) the Company's former President and Chief Executive
Officer (the individuals specified in subsections (iii), (iv) and (v) hereof are
referred to herein as the "Named Executive Officers"); and (vi) all directors
and current executive officers of the Company as a group. As of March 31, 1998,
no shares of the Company's Series A-1 Preferred Stock were outstanding.
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(2)
---------------------------
PERCENT OF
NAME AND ADDRESS OF STOCKHOLDER(1) NUMBER CLASS
- - ---------------------------------------------------------------------------------------- ------------ -------------
COMMON STOCK
5% STOCKHOLDERS
Fletcher International Limited (3).................................................... 16,674,500 8.2%
c/o Midland Bank Trust Corporation (Cayman) Limited
P.O. Box 1109, Mary Street
Grand Cayman, Cayman Islands
British West Indies
DIRECTORS AND CURRENT EXECUTIVE OFFICERS
Leslie G. Denend (4).................................................................. -- --
Robert J. Finocchio, Jr. (5).......................................................... 2,505 *
J.F. Hendrickson, Jr. (6)............................................................. 331,258 *
Stephen E. Hill (7)................................................................... 76,095 *
Albert F. Knorp, Jr. (8).............................................................. 158,868 *
James L. Koch (9)..................................................................... 94,400 *
Thomas A. McDonnell (10).............................................................. 150,000 *
Myron (Mike) Saranga (11)............................................................. 156,760 *
Michael R. Stonebraker (12)........................................................... 589,450 *
Cyril J. Yansouni (13)................................................................ 45,000 *
All current directors and executive officers as a group
(17 persons) (14)................................................................... 1,617,546 1.0%
FORMER EXECUTIVE OFFICERS
Phillip E. White (15)................................................................. 12,819 *
SERIES B PREFERRED STOCK
5% STOCKHOLDERS
CC Investments, LDC (16)(17).......................................................... 12,500 25.0%
c/o Fund Services
Corporate Centre, West Bay Road
P.O. Box 31106, SMB
Grand Cayman, Cayman Islands BVI
Proprietary Convertible Investment Group Inc. (16)(18)................................ 20,000 40.0%
c/o Credit Suisse First Boston
11 Madison Avenue, 3rd Floor
New York, New York 10010
Capital Ventures International (16)(19)............................................... 17,500 35.0%
1 Capital Place
P.O. Box 1787
Georgetown, Grand Cayman, Grand Cayman Islands BVI
- - ------------------------------
* Less than 1%.
7
(1) Unless otherwise indicated, the address for each listed stockholder is c/o
Informix Corporation, 4100 Bohannon Drive, Menlo Park, California 94025.
Except as otherwise indicated, and subject to applicable community property
laws, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock held by them.
(2) For figures related to holdings of Common Stock, applicable percentage
ownership is based on 167,464,942 shares of Common Stock outstanding as of
March 31, 1998, together with applicable options or warrants for such
stockholder. Such outstanding Common Stock share figure reflects that the
holders of the outstanding Series B Preferred could not have elected to
convert their shares into Common Stock of the Company prior to May 19,
1998. Beneficial ownership is determined in accordance with the rules of
the Commission and generally includes voting or investment power with
respect to securities, subject to community property laws, where
applicable. Shares of Common Stock subject to options or warrants that are
presently exercisable or exercisable within 60 days of March 31, 1998 or
shares of Preferred Stock which shares are presently convertible or
convertible within 60 days of March 31, 1998 are deemed to be beneficially
owned by the person holding such options or warrants for the purpose of
computing the percentage of ownership of such person but are not treated as
outstanding for the purpose of computing the percentage of any other
person.
(3) Includes 12,769,208 shares of Common Stock issued upon conversion of
220,000 shares of Series A-1 Preferred on February 13, 1998 and 3,905,292
shares of Common Stock currently issuable upon conversion of shares of
Series A-1 Preferred, which are currently issuable upon exercise of the
Series A-1 Warrant, as such term is defined below. Fletcher International
Limited ("Fletcher") is the original purchaser of 160,000 shares of the
Company's Series A Convertible Preferred Stock (the "Series A Preferred")
and warrants to purchase an additional 140,000 shares of Series A Preferred
(the "Series A Warrant"). Fletcher exchanged such Series A Preferred for a
like number of shares of Series A-1 Preferred and exchanged the Series A
Warrant for a warrant to purchase a like number of shares of Series A-1
Preferred (the "Series A-1 Warrant"). The Series A-1 Preferred is
convertible into Common Stock of the Company based on a conversion rate
that is dependent upon the trading price of the Company's Common Stock as
reported on The Nasdaq Stock Market prior to the time of such conversion.
On February 13, 1998, Fletcher elected to exercise its right to purchase
60,000 shares of Series A-1 Preferred under the Series A-1 Warrant and
simultaneously converted 220,000 shares of A-1 Preferred into 12,769,908
shares of Common Stock. In January 1998, Fletcher gave the Company a notice
designating 16,674,500 shares as the maximum number of shares of Common
Stock issuable upon conversion of the Series A-1 Preferred (including the
12,769,908 issued on February 13, 1998) on or after April 1, 1998; prior to
the time Fletcher delivered such notice, the maximum number of shares of
Common Stock issuable upon conversion of the Series A-1 Preferred was
13,674,500. Fletcher must give the Company another 65 day notice to
increase the maximum number of conversion shares further. The Series A-1
Preferred shares are non-voting securities and holders of Series A-1
Preferred shares are not generally entitled to vote such shares at the
Annual Meeting or otherwise, prior to the conversion of such shares into
Common Stock.
(4) Mr. Denend is a member of the Company's Board of Directors.
(5) Includes 100 shares of Common Stock held by Mr. Finocchio's minor son. Mr.
Finocchio is the Company's Chairman, President and Chief Executive Officer.
See "Employment Agreements and Change-in-Control Arrangements."
(6) Includes 330,000 shares of Common Stock held issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Hendrickson is the
Company's Vice President, Customer Services, and Lenexa (Kansas) Site
General Manager. Mr. Hendrickson forfeited options to acquire 14,000 shares
of Common Stock in connection with the Company's November 1997 option
repricing program. See "Report on the Compensation Committee of the Board
of Directors--Stock Options."
(7) Includes 72,500 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Hill is the Company's
Vice President and General Manager, Tools Business Unit. Mr. Hill forfeited
options to acquire 14,000 shares of Common Stock in connection with the
Company's November 1997 option repricing program. See "Report on the
Compensation Committee of the Board of Directors--Stock Options."
(8) Includes 30,000 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Also includes 105,728 shares
of Common Stock held by Seaport Ventures, L.P., of which Mr. Knorp is a
general partner. Mr. Knorp disclaims beneficial of all shares held by
Seaport Ventures, L.P. except to the extent of his pecuniary interest
therein. Mr. Knorp is a member of the Company's Board of Directors.
(9) Includes 92,000 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Koch is a member of the
Company's Board of Directors.
(10) Includes 95,000 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. McDonnell is a member of
the Company's Board of Directors.
(11) Includes 155,000 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Saranga is the Company's
Senior Vice President, Product Management and Development. Mr. Saranga
forfeited options to acquire 46,000 shares of Common Stock in connection
with the Company's November 1997 option repricing program. See "Report on
the Compensation Committee of the Board of Directors--Stock Options."
(12) Includes 161,882 shares of Common Stock held by Dr. Stonebraker's minor
children and 533 shares of Common Stock held by Dr. Stonebraker as trustee
for the Michael Stonebraker Pension Plan. Dr. Stonebraker is the Company's
Vice President and Chief Technology Officer. Dr. Stonebraker forfeited
options to acquire 15,000 shares of Common Stock in connection with the
Company's November 1997 option repricing program. See "Report on the
Compensation Committee of the Board of Directors--Stock Options."
(13) Includes 45,000 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998. Mr. Yansouni is a member of
the Company's Board of Directors.
(14) Includes 825,500 shares of Common Stock issuable upon exercise of
outstanding options which are presently exercisable or will become
exercisable within 60 days of March 31, 1998.
(15) Mr. White resigned as Chairman of the Board of Directors, President and
Chief Executive Officer in July 1997.
(16) The Series B Preferred is convertible into Common Stock of the Company
based on a conversion rate that is dependent upon the trading price of the
Company's Common Stock. At the time of shares of Series B Preferred are
converted into Common Stock of the Company, the Series B Stockholders will
be issued warrants to purchase additional shares of Common Stock of the
Company.
8
The number of shares of Common Stock purchasable in connection with the
exercise of the Series B Warrants is generally determined according to the
number of shares of Common Stock issuable upon conversion of the Series B
Preferred. The first day such stockholder may elect to convert shares of
the Series B Preferred and exercise the Series B Warrants was May 19,
1998. The Series B Preferred shares are non-voting securities and holders
of Series B Preferred shares are not generally entitled to vote such
shares at the Annual Meeting or otherwise, prior to the conversion of such
shares into Common Stock.
(17) Assuming the conversion of such shares of Series B Preferred based on an
assumed conversion price of $8.50 (the closing sales price of the Company'
Common Stock as reported on The Nasdaq Stock Market on March 31, 1998),
such stockholder would hold 1,470,588 shares of the Company's Common Stock
and warrants to purchase and additional 425,000 shares of Common Stock.
Such warrants are issuable upon the conversion of the underlying Series B
Preferred and are immediately thereafter exercisable.
(18) Assuming the conversion of such shares of Series B Preferred based on an
assumed conversion price of $8.50 (the closing sales price of the Company'
Common Stock as reported on The Nasdaq Stock Market on March 31, 1998),
such stockholder would hold 2,352,941 shares of the Company's Common Stock
and warrants to purchase and additional 600,000 shares of Common Stock.
Such warrants are issuable upon the conversion of the underlying Series B
Preferred and are immediately thereafter exercisable.
(19) Assuming the conversion of such shares of Series B Preferred based on an
assumed conversion price of $8.50 (the closing sales price of the Company'
Common Stock as reported on The Nasdaq Stock Market on March 31, 1998),
such stockholder would hold 2,058,824 shares of the Company's Common Stock
and warrants to purchase and additional 595,000 shares of Common Stock.
Such warrants are issuable upon the conversion of the underlying Series B
Preferred and are immediately thereafter exercisable.
9
EXECUTIVE COMPENSATION
The following table summarizes the total compensation awarded to, earned by,
or paid for services rendered to the Company in all capacities during each of
the fiscal years ended December 31, 1997, 1996 and 1995, respectively, by each
of the Named Executive Officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION(1) SECURITIES
FISCAL ---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
- - --------------------------------------------------- ----------- ---------- ---------- ------------- -------------
CURRENT EXECUTIVE OFFICERS
Robert J. Finocchio, Jr. (2)..................... 1997 $ 185,278 $ 1,500,000 $ 5,000(12)
Chairman, President and Chief 1996 -- -- -- --
Executive Officer 1995 -- -- -- --
J. F. Hendrickson, Jr. (3)....................... 1997 192,667 39,600 83,560(8) 5,977(13)
Vice President, Customer 1996 179,667 -- 30,000 6,013
Services, and Lenexa (Kansas) 1995 171,667 95,000 40,000 5,395
Site General Manager
Stephen E. Hill (4).............................. 1997 163,667 33,400 56,000(9) 2,533(14)
Vice President and General 1996 154,569 -- 30,000 2,500
Manager, Tools Business Unit 1995 145,667 85,000 40,000 2,429
Myron (Mike) Saranga (5)......................... 1997 267,667 69,000 409,000(10) 43,886(15)
Senior Vice President, Product 1996 245,667 -- 100,000 45,875
Management and Development 1995 229,333 168,000 130,000 5,525
Michael R. Stonebraker (6)....................... 1997 209,200 42,400 135,000(11) 2,592(16)
Vice President and Chief 1996 155,000 -- 75,000 1,620
Technology Officer 1995 -- -- -- --
FORMER EXECUTIVE OFFICERS
Phillip E. White (7)............................. 1997 277,083 -- -- 203,967(17)
Chairman, President and Chief 1996 461,667 -- 200,000 4,484
Executive Officer 1995 421,667 400,000 250,000 4,256
- - ------------------------------
(1) Other than the salary and bonus described herein, the Company did not pay
any executive officer named in the Summary Compensation Table any fringe
benefits, perquisites or other compensation in excess of 10% of such
executive officer's salary and bonus during fiscal 1997, 1996 or 1995.
(2) Mr. Finocchio became Chairman, President and Chief Executive Officer in
July 1997. Accordingly, he received no reportable income from the Company
for fiscal 1996 or 1995. Mr. Finocchio's salary and other compensation for
fiscal 1997 were determined in accordance with the provisions of his
Employment Agreement with the Company. See "Employment Agreements and
Change in Control Arrangements." In January 1998, the Company granted Mr.
Finocchio an additional option under the 1994 Plan to acquire 500,000
shares of Common Stock, subject to vesting in equal annual installments
over four years.
(3) Mr. Hendrickson became Vice President, Customer Services, in July 1992 and
Lenexa (Kansas) Site General Manager in February 1995.
(4) Mr. Hill was promoted to Vice President and General Manager, Tools Business
Unit in January 1998 from Vice President, Advanced Technology, a position
he had held since December 1995.
(5) Mr. Saranga became Senior Vice President, Product Management and
Development in May 1993.
(6) Dr. Stonebraker became Vice President and Chief Technology Officer in
February 1996. Accordingly, he received no reportable income for fiscal
1995.
(7) Mr. White resigned as Chairman, President and Chief Executive Officer in
July 1997.
(8) Includes options to purchase 56,000 shares that Mr. Hendrickson elected to
reprice under the Company's November 1997 option repricing program. In
connection with such repricing, Mr. Hendrickson forfeited the right to
purchase 14,000 shares of Common Stock under options previously granted to
him. See "Report of the Compensation Committee of the Board of
Directors--Stock Options."
(9) Fiscal 1997 figure includes 56,000 shares that Mr. Hill elected to reprice
under the Company's November 1997 option repricing program. In connection
with such repricing, Mr. Hill forfeited the right to purchase 14,000 shares
of Common Stock under options previously granted to him. See "Report of the
Compensation Committee of the Board of Directors--Stock Options." In
January 1998, the Company granted Mr. Hill an additional option under the
1994 Plan to acquire 100,000 shares of Common Stock, subject to vesting in
equal installments over four years.
10
(10) Fiscal 1997 figure includes 184,000 shares Mr. Saranga elected to reprice
under the Company's November 1997 option repricing program. In connection
with such repricing, Mr. Saranga forfeited the right to purchase 46,000
shares of Common Stock under options previously granted to him. See
"Report of the Compensation Committee of the Board of Directors--Stock
Options." Fiscal 1997 figure also includes 100,000 option shares of which
will vest on December 31, 2000 if Mr. Saranga remains an employee of the
Company on such date. In January 1998, the Company granted Mr. Saranga the
right to receive 35,000 performance shares of Common Stock under the 1994
Plan during each of the next three years if certain financial milestones
are met as of January 1, 1999, 2000 and 2001. Such performance shares are
subject to a right of repurchase in favor of the Company which shall lapse
if Mr. Saranga remains an employee of the Company on January 1, 2001.
(11) Fiscal 1997 figure includes options to purchase 60,000 shares Dr.
Stonebraker elected to reprice under the Company's November 1997 option
repricing program. In connection with such repricing, Dr. Stonebraker
forfeited the right to purchase 15,000 shares of Common Stock under
options previously granted to him. See "Report of the Compensation
Committee of the Board of Directors--Stock Options."
(12) Represents reimbursement by the Company of $5,000 in legal fees incurred
in connection with the negotiation of Mr. Finocchio's Employment
Agreement. See "Employment Agreements and Change in Control Arrangements."
(13) Represents $4,050, $4,013 and $3,395 in group life insurance paid by the
Company in fiscal 1997, 1996 and 1995, respectively, and $1,927, $2,000
and $2,000 in matching contributions under the Company's 401(k) Plan by
the Company in fiscal 1997, 1996 and 1995, respectively.
(14) Represents $533, $500 and $429 in group life insurance paid by the Company
in fiscal 1997, 1996 and 1995, respectively, and $2,000, $2,000 and $2,000
in matching contributions under the Company's 401(k) Plan by the Company
in fiscal 1997, 1996 and 1995, respectively.
(15) Represents $6,318, $4,050 and $3,525 in group life insurance paid by the
Company in fiscal 1997, 1996 and 1995, respectively and $2,000, $2,000 and
$2,000 in matching contributions under the Company's 401(k) plan in fiscal
1997, 1996 and 1995, respectively. Includes $35,568 and $39,825 in
forgiveness by the Company in fiscal 1997 and 1996, respectively, of
outstanding principal and accrued interest (such forgiveness amounts were
not grossed up to satisfy tax obligations) under a promissory note
delivered by Mr. Saranga to the Company. See "Certain Transactions."
(16) Represents $2,592, and $1,620 in group life insurance paid by the Company
in fiscal 1997 and 1996, respectively.
(17) Represents $4,050, $2,484 and $2,256 in group life insurance paid by the
Company in fiscal 1997, 1996 and 1995, respectively; and $2,000, $2,000
and $2,000 in matching contributions under the Company's 401(k) plan paid
by the Company in fiscal 1997, 1996 and 1995, respectively. Fiscal 1997
figure also includes $197,917 paid by the Company in connection with Mr.
White's resignation pursuant to the terms of his Employment Agreement with
the Company. See "Employment Agreement and Change in Control Arrangements"
and "Certain Transactions."
11
STOCK OPTION GRANTS
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended December
31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------- VALUES AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTIONS TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------------
GRANTED FISCAL 1997(2) SHARE(3) DATE(4) 5% 10%
---------- --------------- ---------- ----------- ------------- -------------
CURRENT EXECUTIVE OFFICERS
Robert J. Finocchio, Jr. (5)..... 1,500,000 11.44% $ 10.8125 07/22/07 $ 10,199,885 $ 25,848,511
J. F. Hendrickson, Jr. (6)....... 27,500 0.21 9.0313 06/18/07 156,193 395,823
32,000 0.24 7.1563 04/18/05 99,665 234,842
24,000 0.18 7.1563 05/16/06 88,044 213,728
Stephen E. Hill (7).............. 50,000 0.38 9.0313 06/18/07 283,987 719,678
32,000 0.24 7.1563 04/18/05 99,665 234,842
24,000 0.18 7.1563 05/16/06 88,044 213,728
Myron (Mike) Saranga (8)......... 125,000 0.95 9.0313 06/18/07 709,967 1,799,196
100,000 0.76 9.5000 09/15/07 597,450 1,514,055
104,000 0.79 7.1563 04/18/05 323,911 763,235
80,000 0.61 7.1563 05/16/06 293,481 712,425
Michael R. Stonebraker (9)....... 75,000 0.57 9.0313 06/18/07 425,980 1,079,517
60,000 0.46 7.1563 04/15/06 217,424 526,549
FORMER EXECUTIVE OFFICERS
Phillip E. White................. -- -- -- -- -- --
- - ------------------------
(1) Potential realizable value is based on the assumption that the Common Stock
of the Company appreciates at the annual rate shown (compounded annually)
from the date of grant until the expiration of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Commission and do not reflect the Company's estimate of future stock price
growth.
(2) Based on options to acquire 13,107,338 shares granted under the 1994 Plan,
the Director Plan and the 1997 Non-Statutory Stock Option Plan during fiscal
1997. Such option grants include shares granted as a result of the Company's
November 1997 option repricing program. See "Report of the Compensation
Committee of the Board of Directors Stock Options." Unless otherwise
specified herein, all options granted to the Named Executive Officers were
under the 1994 Plan.
(3) Options were granted at an exercise price equal to not less than the fair
market value of the Company's Common Stock on the date of grant as reported
on the Nasdaq National Market. The exercise price may be paid in cash,
check, by delivery of already-owned shares of the Company's Common Stock
subject to certain conditions or pursuant to a cashless exercise procedure
under which the optionee provides irrevocable instructions to a brokerage
firm to sell the purchased shares and to remit to the Company, out of the
sale proceeds, an amount equal to the exercise price plus all applicable
withholding taxes.
(4) Twenty-five percent (25%) of the shares issuable upon exercise of options
granted under the 1994 Plan become vested on the first anniversary of the
date of grant, and the remaining shares vest over three years at the rate of
25% of the shares subject to option vesting on each successive anniversary
of the option grant date. Unless otherwise specified, options granted to
Named Executive Officers in fiscal 1997, including options granted outside
the 1994 Plan, are subject to the Company's standard four year vesting
schedule described above.
(5) The options to purchase 1,500,000 option shares of Common Stock granted to
Mr. Finocchio were issued in connection with his Employment Agreement with
the Company. See "Executive Compensation and Change in Control
Arrangements." Of the 1,500,000 option shares granted to Mr. Finocchio,
1,000,000 were granted under the 1994 Plan and 500,000 were granted under
the Company's 1997 Non-Statutory Stock Option Plan. In addition, in January
1998, the Company granted Mr. Finocchio an additional option under the 1994
Plan to acquire 500,000 shares of Common Stock.
(6) Option grant figures includes 56,000 shares Mr. Hendrickson elected to
reprice under the Company's November 1997 option repricing program. In
connection with such repricing, Mr. Hendrickson forfeited the right to
purchase 14,000 shares of Common Stock under options previously granted to
him. See "Report of the Compensation Committee of the Board of
Directors--Stock Options."
12
(7) Option grant figures includes 56,000 shares Mr. Hill elected to reprice
under the Company's November 1997 option repricing program. In connection
with such repricing, Mr. Hill forfeited the right to purchase 14,000 shares
of Common Stock under options previously granted to him. See "Report of the
Compensation Committee of the Board of Directors--Stock Options." In
addition, in January 1998, the Company granted Mr. Hill an additional option
under the 1994 Plan to acquire 100,000 shares of Common Stock, subject to
vesting in equal annual installments over four years.
(8) Option grant figures includes 184,000 shares Mr. Saranga elected to reprice
under the Company's November 1997 option repricing program. In connection
with such repricing, Mr. Saranga forfeited the right to purchase 46,000
shares of Common Stock under options previously granted to him. See "Report
of the Compensation Committee of the Board of Directors--Stock Options." Mr.
Saranga's option to purchase up to 100,000 shares of the Common Stock of the
Company granted in September 1997 under the 1994 Plan will become vested on
December 31, 2000 if Mr. Saranga remains an employee of the Company on such
date. In January 1998, the Company granted Mr. Saranga the right to receive
35,000 performance shares of Common Stock under the 1994 Plan each of the
next three years if certain financial milestones are met as of January 1,
1999, 2000 and 2001. Such performance shares are subject to a right of
repurchase in favor of the Company which shall lapse if Mr. Saranga remains
an employee of the Company on January 1, 2001.
(9) Option grant figures includes 60,000 shares Dr. Stonebraker elected to
reprice under the Company's November 1997 option repricing program. In
connection with such repricing, Dr. Stonebraker forfeited the right to
purchase 15,000 shares of Common Stock under options previously granted to
him. See "Report of the Compensation Committee of the Board of
Directors--Stock Options."
OPTION EXERCISES AND FISCAL 1997 YEAR-END VALUES
The following table sets forth certain information regarding the exercise of
stock options by the Named Executive Officers during the fiscal year ended
December 31, 1997 and stock options held as of December 31, 1997 by the Named
Executive Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT DECEMBER 31, 1997 AT DECEMBER 31, 1997(2)
ACQUIRED OR VALUE ----------------------------- ---------------------------
EXERCISED REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- -------------- ------------- ------------ -------------
CURRENT EXECUTIVE OFFICERS
Robert J. Finocchio, Jr. (3)..... -- $ -- -- 1,500,000 $ -- $ --
J. F. Hendrickson, Jr............ -- -- 320,000 93,500 132,800 --
Stephen E. Hill (4).............. 15,000 142,188 62,500 116,000 -- --
Myron (Mike) Saranga (5)......... -- -- 135,000 429,000 -- --
Michael R. Stonebraker........... -- -- -- 135,000 -- --
FORMER EXECUTIVE OFFICERS
Phillip E. White................. 50,000 63,810 1,245,000(6) -- 624,348(6) --
- - ------------------------
(1) Market value at the time of exercise less the applicable exercise price.
(2) Based on the closing sales price of $4.750 of the underlying securities as
of December 31, 1997 as reported on the Nasdaq National Market minus the
exercise price.
(3) In January 1998, the Company granted Mr. Finocchio an additional option to
purchase 500,000 shares of Common Stock under the 1994 Plan, subject to
vesting in equal installments over four years.
(4) In January 1998, the Company granted Mr. Hill an additional option to
purchase 100,000 shares of Common Stock under the 1994 Plan, subject to
vesting in equal installments over four years.
(5) In January 1998, the Company granted Mr. Saranga the right to receive 35,000
performance shares of Common Stock under the 1994 Plan each of the next
three years if certain financial milestones are met as of January 1, 1999,
2000 and 2001. Such performance shares are subject to a right of repurchase
in favor of the Company which shall lapse if Mr. Saranga remains an employee
of the Company on January 1, 2001.
(6) All of Mr. White's options expired in February 1998. Prior to the expiration
of such options, Mr. White exercised options to acquire an aggregate of
540,000 shares of Common Stock in January and February 1998 with a realized
value of approximately $1,161,380.
13
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS WITH THE COMMISSION, THIS REPORT OF THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS IS NOT "SOLICITING MATERIAL," SHALL NOT BE
DEEMED "FILED" WITH THE COMMISSION AND SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY SUCH FILINGS.
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and the specific compensation levels for senior executives,
including the Company's Chief Executive Officer.
GENERAL COMPENSATION PHILOSOPHY
The primary objectives of the Company's executive compensation policies
include the following:
- To attract, motivate and retain a highly qualified executive management
team;
- To link executive compensation to the Company's financial performance as
well as to defined individual management objectives established by the
Committee;
- To compensate competitively with the practices of similarly situated
technology companies; and
- To create management incentives designed to enhance stockholder value.
The Company competes in an aggressive and dynamic industry and, as a result,
believes that finding, motivating and retaining quality employees, particularly
senior managers, sales personnel and technical personnel, are key factors to the
Company's future success. The Committee's compensation philosophy seeks to align
the interests of stockholders and management by tying compensation to the
Company's financial performance, either directly in the form of salary and
bonuses paid in cash or indirectly in the form of appreciation of stock options
and stock purchase rights granted to employees through the Company's equity
incentive programs.
The Company, at the request of the Committee, has retained the services of
Towers Perrin to assist the Committee in connection with its duties. Towers
Perrin has provided these services to the Committee since 1991. As part of these
services, Towers Perrin advises the Committee on the reasonableness of
compensation paid to executive officers of the Company and how the overall level
of compensation paid to executive officers compares to that paid by other
companies that compete with the Company for executive employees (the "Comparison
Companies").
The Comparison Companies are a group of companies in the computer industry
that are either the source of executive employees for the Company or which offer
employment to candidates from the Company. The Comparison Companies are
generally headquartered in the same geographic area as the Company and have
similar international presences, market capitalizations and numbers of
employees. They comprise approximately 40% of the companies in the Software
Product Group of the Hambrecht & Quist Software Sector Index shown on the stock
comparison graph below. The Committee believes that the Comparison Companies is
the best group for comparing the Company's compensation levels because the
Company competes with this group of companies for employees. The companies that
comprise the Hambrecht & Quist Software Sector Index, the group used for stock
performance, are the best for evaluating the Company's stock performance because
they most closely represent the companies whose products and services compete
with those of the Company.
CASH COMPENSATION
Cash compensation for the Company's senior executives consists of a fixed
base salary and an annual bonus. Each executive officer's target total annual
cash compensation (I.E., salary and bonus) is determined after a review of
survey data compiled by Towers Perrin regarding executives at Comparison
Companies as
14
well as other relevant market data. For each executive officer, the Company
seeks to establish a total target annual compensation level that is consistent
with the average of compensation paid to executives at the companies surveyed.
For fiscal 1997, the Company's salaries for executive officers tended to closely
approximate the average of the Comparison Companies.
In connection with determining annual bonuses, the Committee establishes a
bonus target for each executive officer under the Company's Executive Incentive
Compensation Plan (the "EICP"). In setting annual goals for executive bonuses,
the Committee considers various factors, including the anticipated introduction
of new products, general economic conditions and the Company's competitive
position and financial performance relative to its competitors. The target bonus
for an executive is intended to relate to his or her potential impact on
corporate results, financially and otherwise, and the percentage of the target
bonus actually received is determined with reference to enumerated objectives
actually achieved. The Committee attempts to set aggressive but realizable
objectives that will result, directly or indirectly, in increased revenues and
improved net income as well as an improved competitive position for the Company
in its target markets. In order to achieve the purposes of the plan, the
Committee communicates individual performance objectives and the corresponding
bonus targets to executives at the beginning of each fiscal year. The details of
the EICP are discussed more fully below under the heading "Compensation of Chief
Executive Officer."
EQUITY INCENTIVE PROGRAMS
Long-term equity incentives, including stock options and performance shares
granted pursuant to the Company's 1994 Plan, help to align the economic
interests of the Company's management and employees with those of its
stockholders. Stock options are a particularly strong incentive because they are
valuable to employees only if the fair market value of the Company's Common
Stock increases above the exercise price, which is generally set at the fair
market value of the Company's Common Stock on the date the option is granted.
However, in exceptional circumstances where the fair market value of the
Company's Common Stock has declined over time to a point where such per share
value is significantly lower than the exercise price of substantially all of the
Company's outstanding options, the Committee may recommend to the full Board of
Directors that such outstanding options be repriced so that the exercise price
of such options is adjusted to equal the fair market value of the Company's
Common stock on the date of such repricing. During fiscal 1997, the Committee
recommended and the Board of Directors approved an option repricing on two
occasions; however, the executive officers of the Company were only eligible to
participate in the first option repricing. See "Stock Options" below. In
addition to aligning executive and stockholder incentives through establishing
an exercise price for options equal to the fair market value of the Company's
Common Stock on the date such exercise price is determined, in order to promote
the long-term economic interests of the Company, employees must remain employed
with the Company for a fixed period of time for their options to vest fully. In
general, option shares granted under the 1994 Plan vest in equal annual
installments over four years. The number of options granted to each executive is
determined by the Committee. In making its determination, the Committee
considers the executive's position at the Company, his or her individual
performance, the number of options held by the executive, with particular
attention to the executive's unvested option position, and other factors.
The Committee may also grant performance shares under the 1994 Plan from
time to time to certain executive officers. The Committee generally grants such
performance shares subject to the Company's obtainment of specific financial
milestones, such as percentage increases in the Company's revenues. Such vesting
milestones for performance shares granted under the 1994 Plan are designed to be
of sufficient duration to align the interests of the executive officer receiving
such shares with the long term financial performance of the Company. In
addition, the Company may impose certain additional restrictions on the vesting
of performance shares, including requiring the grantee to remain an employee of
the Company for a fixed time before the performance shares will vest.
15
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Generally, in determining the Chief Executive Officer's compensation, the
Committee considers comparative financial and compensation data of selected peer
companies. On June 18, 1997, the Company entered into an at-will employment
agreement with Robert F. Finocchio, the Company's Chairman, President and Chief
Executive Officer, which provides for an annual base salary of $460,000, subject
to annual review concerning increases. Mr. Finocchio's base annual salary
approximates the annual salary of Chief Executive Officers of similarly situated
companies. Pursuant to the agreement, the Company also granted Mr. Finocchio
options to purchase 1,500,000 shares of Common Stock at an exercise price per
share of $10.8125, subject to vesting in equal annual installments over four
years. Of the 1,500,000 option shares Mr. Finocchio received under his
employment agreement, 1,000,000 were issued under the 1994 Plan and 500,000 were
issued under the Company's 1997 Non-Statutory Stock Option Plan. In January
1998, the Company granted Mr. Finocchio an additional option under the 1994 Plan
to acquire 500,000 shares of Common Stock, subject to vesting in equal annual
installments over four years. Mr. Finocchio's employment agreement provides that
in the event of a merger or change in control of the Company, the exercisability
of Mr. Finocchio's options will accelerate so as to become fully vested.
The Chief Executive Officer and all other executive officers receive a base
salary that is generally adjusted annually to reflect changes in market
conditions, the Company's performance and individual responsibilities.
Adjustments to Mr. Finocchio's base salary from the salary set forth in his
employment agreement will be in accordance with those factors. In addition, the
Chief Executive Officer and all other executive officers and certain other key
management employees participate the EICP. Pursuant to the terms of his
employment agreement with the Company, Mr. Finocchio was not eligible to
participate in the Company's executive bonus plan for fiscal 1997. Bonuses paid
under the EICP are based on the officer's performance and on the performance of
the Company's as measured by financial objectives established by the Committee
at the beginning of each fiscal year. In 1997, as they were for fiscal 1996 and
1995, the corporate financial objectives are operating profit and revenue
growth, which are of equal importance. The financial objectives are reviewed by
the Committee each year and those used in a particular year are intended to
reflect those areas most necessary to maximize the return to investors.
Depending on the employee's level, target compensation under the EICP ranges
from 20% to 60% of the employee's base salary. If the Company's financial and
the individual's personal objectives are exceeded it is possible for the actual
bonus amount to exceed the target amount.
The Company will continue to grant stock options (and may grant performance
shares) to the Chief Executive Officer based primarily on the Company's
evaluation of his ability to influence the Company's long-term growth and
profitability. The Committee determines the size of the option grant based on
its estimate of the equity incentive value of the Chief Executive Officer's
existing unvested option position.
COMPENSATION OF OTHER EXECUTIVES
The Committee has adopted compensation policies for its remaining senior
executives similar to those established for the Chief Executive Officer. Using
salary data supplied by outside consultants and other publicly available data,
such as proxy data from peer companies, the Chief Executive Officer recommends
to the Committee base salaries for executive officers that are within the range
of salaries for persons holding similar positions at peer companies. The Chief
Executive Officer and the Committee also consider factors such as the Company's
performance (financial and otherwise) relative to peer companies and the
individual officer's performance during the most recent fiscal year and
potential to contribute to the Company in the future. For fiscal 1997, the base
salaries established by the Committee for the Company's executive officers
tended to be approximately the average of surveyed companies. Cash bonuses are
also determined for the executive officers in a manner consistent with the
determination of the Chief Executive Officer's bonus, based primarily on the
Company's financial results and the executive officer's performance relative to
enumerated EICP goals. Executive officer bonuses during fiscal 1997 were
generally consistent with bonuses paid to officers performing similar functions
at peer companies. For fiscal 1998, the
16
Committee has placed greater emphasis on financial performance relative to EICP
goals in determining bonus payments.
The Company also determines stock option and performance share grants for
executive officers based on similar criteria as those used or determining stock
option grants for the Chief Executive Officer with particular attention to the
incentive effect of additional option grants for executive officers whose prior
grants are substantially vested.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The committee has studied Section 162(m) of the Internal Revenue Code and
related regulations of the Internal Revenue Service, which limit the federal
income tax deductibility of compensation paid to the Company's Chief Executive
Officer and to each of the five most highly compensated executive officers other
than the Chief Executive Officer. The Company generally may deduct compensation
paid to such officer only if the compensation does not exceed $1 million during
any fiscal year or to the extent compensation is "performance-based" as
contemplated in Section 162(m). The Company has qualified its 1994 Plan as a
performance-based plan and, therefore, compensation realized in connection with
options granted under the 1994 Plan is exempt under the statute. The Committee
does not believe that the other components of the Company's compensation will be
likely in the aggregate to exceed $1 million for any executive officer in fiscal
1998 and, therefore, has concluded that no further action with respect to
qualifying such compensation for deductibility is necessary at this time. The
Committee will continue to evaluate the advisability of qualifying the
deductibility of such compensation in the future.
STOCK OPTIONS
The principal purpose of the Company's equity incentive plan is to provide
an equity incentive to employees to remain in the employment of the Company and
to work diligently in its best interests. The Board of Directors determined that
this purpose would not be achieved for employees holding options exercisable at
prices above the market price of the Company's Common Stock, and further
determined that it was critical to the best interests of the Company and to its
stockholders that the Company retain the services of these employees.
Accordingly, in September 1997, the Company's Board of Directors authorized the
repricing of outstanding options to purchase Common Stock under the Company's
stock option plans. Employees, including Named Executive Officers, were eligible
to participate only if they remained actively employed at the effective date of
the repricing and were only permitted to exchange options outstanding prior to
May 1, 1997. The repricing/option exchange was effective November 21, 1997 (the
"Repricing Effective Date"). The repricing program offered eligible employees
the opportunity to exchange eligible outstanding options with exercise prices in
excess of the closing sales price of the Company's Common Stock on the Repricing
Effective Date for a new option with an exercise price equal to such price.
Other than the exercise price, each new option issued upon exchange has terms
substantially equivalent to the surrendered option, including with respect to
the number of shares, vesting terms and expiration. Options issued in connection
with the exchange may not be exercised for a period of one year from the
Repricing Effective Date, however. In addition, officers of the Company
participating in the option exchange were required to forfeit 20% of the shares
subject to each option being surrendered. The exercise price for repriced
options was $7.1563, the closing sales price of the Company's Common Stock on
the Repricing Effective Date. The following table provides information with
respect to the November 1997 repricing for the Named Executive Officers and for
other executive officers of the Company who elected to reprice options. These
are the only executive officers who had any of their options repriced.
17
TEN-YEAR OPTION/SAR REPRICINGS
NUMBER OF
SECURITIES LENGTH OF
UNDERLYING MARKET PRICE EXERCISE ORIGINAL OPTION
OPTIONS/SARS OF STOCK AT PRICE AT TIME TERM REMAINING
REPRICED OR TIME OF OF REPRICING NEW AT DATE OF
AMENDED REPRICING OR OR AMENDMENT EXERCISE REPRICING OR
NAME DATE (#)(1) AMENDMENT ($) ($) PRICE($) AMENDMENT
- - -------------------------------------- --------- ------------- ------------- ------------- ----------- ---------------
CURRENT EXECUTIVE OFFICERS
Robert F. Finocchio, Jr. (2)........ -- -- -- -- -- --
Karen Blasing (3)................... 11/21/97 4,200 7.1563 18.2500 7.1563 7.41
11/21/97 4,800 7.1563 18.2500 7.1563 8.49
11/21/97 8,000 7.1563 18.2500 7.1563 8.54
J. F. Hendrickson, Jr. (4).......... 11/21/97 32,000 7.1653 18.2500 7.1563 7.41
11/21/97 24,000 7.1563 24.1250 7.1563 8.48
Stephen E. Hill (5)................. 11/21/97 32,000 7.1563 18.2500 7.1563 7.41
11/21/97 24,000 7.1563 24.1250 7.1563 8.48
Myron (Mike) Saranga (6)............ 11/21/97 104,000 7.1563 18.2500 7.1563 7.41
11/21/97 80,000 7.1563 24.1250 7.1563 8.48
Michael R. Stonebraker (7).......... 11/21/97 60,000 7.1563 19.3750 7.1563 8.40
FORMER EXECUTIVE OFFICERS
Philip E. White (8)................. -- -- -- -- -- --
- - --------------------------
(1) All options repriced by the Named Executive Officers and other executive
officers listed in the above table were granted under the 1994 Plan.
(2) Mr. Finocchio became Chairman, President and Chief Executive Officer in July
1997; consequently he was not eligible to participate in the November 1997
repricing.
(3) Ms. Blasing became the Company's Vice President, Business Development
Finance in May 1998. Prior to that time, Ms. Blasing had served as the
Company's Corporate Controller since June 1996 and as a Vice President of
the Company since October 1997 before resigning from such positions in April
1998. Ms. Blasing forfeited the right to purchase 4,250 shares of Common
Stock as a result of the repricing. At the time of the repricing, 4,600 of
the 17,000 options Ms. Blasing elected to reprice were vested.
(4) Mr. Hendrickson forfeited the right to purchase 14,000 shares of Common
Stock as a result of the repricing. At the time of repricing, 22,000 of the
56,000 options Mr. Hendrickson elected to reprice were vested.
(5) Mr. Hill forfeited the right to purchase 14,000 shares of Common Stock as a
result of the repricing. At the time of repricing, 22,000 of the 56,000
options Mr. Hill elected to reprice were vested.
(6) Mr. Saranga forfeited his right to purchase 46,000 shares of Common Stock as
a result of the repricing. At the time of the repricing, 72,000 of the
184,000 options Mr. Saranga elected to reprice were vested.
(7) Dr. Stonebraker forfeited his right to purchase 15,000 shares of Common
Stock as a result of the repricing. At the time of the repricing, 15,000 of
the 60,000 options Dr. Stonebraker elected to reprice were unvested.
(8) Mr. White resigned as the Company's Chairman, President and Chief Executive
Officer in July 1997; consequently he was not eligible to participate in the
November 1997 repricing.
In December 1997, the Company's Board of Directors authorized a second
option repricing to be effective January 9, 1998 (the "Second Repricing
Effective Date") based upon the closing sales price of the Company's Common
Stock as of the Second Repricing Effective Date ($5.094). Under the terms of the
second repricing, each employee, excluding officers and directors of the
Company, could elect to exchange any option outstanding as of May 1, 1997 for a
new option with an exercise price equal to the closing sales price on the Second
Repricing Effective Date. Options exchanged in the second repricing may not be
exercised for a period of one year from the Second Repricing Effective Date.
THE COMPENSATION COMMITTEE
James L. Koch
Thomas A. McDonnell
Cyril J. Yansouni
18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
on Form 3 and changes in ownership on Form 4 or 5 with the Commission. Such
officers, directors, and 10% shareholders are also required by SEC rules to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons, the Company believes
that, during the fiscal year ended December 31, 1997, except as noted below, all
Section 16(a) filing requirements applicable to its officers, directors, and 10%
stockholders were satisfied on a timely basis. In making these statements, the
Company has relied upon the written representations of its officers and
directors.
Thomas McDonnell, a member of the Company's Board of Directors,
inadvertently failed to file a report on Form 4 in March of 1997 for a
transaction involving the exercise of an option under the 1994 Plan. Such
transaction was reported on Mr. McDonnell's Form 5 for the year ended December
31, 1997.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
On July 18, 1997, the Company entered into an at-will employment agreement
with Mr. Finocchio, the Company's Chairman, President and Chief Executive
Officer. The agreement provides for an annual base salary of $460,000, subject
to annual review concerning increases. Pursuant to the agreement, the Company
granted Mr. Finocchio an option to purchase 1,000,000 shares of Common Stock
under the 1994 Plan at an exercise price per share of $10.8125, subject to
vesting in equal annual installments over four years and an option under the
Company's 1997 Non-Statutory Stock Option Plan to acquire an additional 500,000
shares of Common Stock also at an exercise price of $10.8125, and also subject
to vesting under the same terms as the grant under the 1994 Plan. In January
1998, the Company granted Mr. Finocchio an additional option under the 1994 Plan
to acquire 500,000 shares of Common Stock, subject to vesting in equal annual
installments over four years. In the event of a merger or change in control of
the Company, the exercisability of Mr. Finocchio's options will accelerate so as
to become fully vested. See "Report of the Compensation Committee of the Board
of Directors--Compensation of Chief Executive Officer."
On September 24, 1997, the Company entered into an at-will employment letter
agreement with Jean-Yves F. Dexmier, the Company's Executive Vice President,
Finance and Chief Financial Officer, which provides for an annual base salary of
$350,000 and an annual cash bonus based on the achievement of individual and
Company performance objectives. In the event Mr. Dexmier is terminated without
cause within the first twelve months of his employment with the Company, he will
be entitled to receive severance in an amount equal to one year of base salary
plus any bonus he would have been entitled to receive under the Company's
executive compensation plan. If such termination occurs after Mr. Dexmier's
first twelve months with the Company, he shall be entitled to receive as
severance an amount equal to six months base salary. If there is a change of
control of the Company within the first twelve months Mr. Dexmier is employed
with the Company, Mr. Dexmier will be entitled to receive $1,000,000 less any
stock option profit realized upon the change in ownership. In connection with
his employment, the Company granted Mr. Dexmier an option under the 1994 Plan to
acquire 500,000 shares of Common Stock at an exercise price of $6.8125, subject
to vesting in equal annual installments over four years. In January 1998, the
Company granted Mr. Dexmier an additional option under the 1994 Plan to acquire
100,000 shares of Common Stock, subject to vesting in equal annual installments
over four years.
On September 18, 1997, the Company entered into an at-will employment letter
agreement with Wesley Raffel, the Company's Vice President, North American Field
Operations, which provides for an annual base salary of $250,000 and an annual
cash bonus based on the achievement of individual and Company performance
objectives. In the event of a change in the Chief Executive Officer or a change
in ownership of the Company where Mr. Raffel's employment is terminated in
connection with such event,
19
Mr. Raffel will be entitled to receive severance in an amount equal to one year
of base salary. In connection with his employment, the Company granted Mr.
Raffel an option under the 1994 Plan to acquire 325,000 shares of Common Stock
at an exercise price of $7.3438, subject to vesting in equal annual installments
over four years.
In October 1997, the Company entered into Change of Control Agreements (the
"Change of Control Agreements") with Messrs. Dexmier, Raffel and Myron (Mike)
Saranga, the Company's Senior Vice President, Product Management and Development
and Karen Blasing, the Company's Vice President, Business Development Finance.
The Change of Control Agreements, which are substantially similar for each such
executive officer, provide that in the event a change in control of the Company
occurs, the exercisability of each executive officer's options will accelerate
so as to become fully vested.
In January 1998, the Company entered into an at-will employment letter with
Susan T. Daniel, the Company's Vice President, Human Resources, which provides
for an annual base salary of $230,000 and an annual cash bonus based on the
achievement of individual and Company performance objectives. Ms. Daniel will
also receive $7,500 annually her first two years of employment if she remains
employed with the Company on the anniversary date of her employment with the
Company. In connection with her employment, the Company granted Ms. Daniel an
option under the 1994 Plan to acquire 200,000 shares of Common Stock at a per
share exercise price of $7.4688, subject to vesting in equal installments over
four years. In the event of a change of ownership of the Company within Ms.
Daniel's first two years of employment with the Company where Ms. Daniel's
employment is terminated within 90 days of the change of control event other
than for cause, she will be entitled to receive severance in an amount equal to
one year base salary. If a change of control in the ownership of the Company
occurs within Ms. Daniel's first six months with the Company, the exercisability
of her options will accelerate as to two years additional vesting. If such
change of control takes place after such six month period, the exercisability of
Ms. Daniel's options will accelerate so as to become fully vested.
In January 1998, the Company entered into an at-will employment letter with
Gary Lloyd, the Company's Vice President, Legal, General Counsel and Secretary,
which provides for an annual base salary of $200,000 and an annual cash bonus
based on the achievement of individual and Company performance objectives. In
connection with his employment, the Company granted Mr. Lloyd an option under
the 1994 Plan to acquire 150,000 shares of Common Stock at a per share exercise
price of $5.7500, subject to vesting in equal installments over four years. If a
change of control in the ownership of the Company occurs within Mr. Lloyd's
first six months with the Company, the exercisability of his options will
accelerate as to two years additional vesting. If such change of control takes
place after such six month period, the exercisability of Mr. Lloyd's options
will accelerate so as to become fully vested.
On March 18, 1998, the Company entered into an at-will employment letter
agreement with Diane L. Fraiman, the Company's Vice President, Corporate
Marketing, which provides for an annual base salary of $250,000 and an annual
cash bonus based on the achievement of individual and Company performance
objectives. Pursuant to her employment letter, Ms. Fraiman received a $135,000
"relocation bonus" which Ms. Fraiman will be required to repay in full if she
terminates her employment with the Company prior to the first anniversary of her
commencement date. Ms. Fraiman will be required to repay half that amount if she
terminates her employment after the first anniversary date but prior to the
second anniversary date. According to her employment letter, Ms. Fraiman will
also be reimbursed for relocation costs. In connection with her employment with
the Company, the Company granted Ms. Fraiman an option to acquire 200,000 shares
of Common Stock at an exercise price of $8.531 per share, subject to vesting in
equal installments over four years. If there is a change in control of the
Company within the first six months after the date of Ms. Fraiman's employment
letter, the vesting of Ms. Fraiman's options will accelerate as to two year's
additional vesting. If such change of control occurs after such six month
anniversary, Ms. Fraiman's options will accelerate so as to become fully vested.
20
Other than the employment arrangements described above, the Company does not
have employment agreements with any current executive officer or director.
In connection with Philip E. White's resignation as Chairman, President and
Chief Executive Officer in July 1997, and pursuant to his employment agreement
with the Company, the Company was obligated to pay Mr. White six months salary
at a rate of $39,583.34 per month from the time of his resignation.
The Company has entered into severance arrangements with additional former
executive officers of the Company. See "Certain Transactions."
The Company has also adopted a Rights Agreement, commonly referred to as a
poison pill. The Company's Board of Directors has declared a dividend of one
Purchase Right (each a "Right" and collectively the "Rights") under the
Company's Rights Agreement for each share of the Company's Common Stock
outstanding on September 17, 1991 or thereafter issued. When exercisable, each
Right initially entitles the holder to purchase one share of Common Stock at a
specified price. The Rights become exercisable on the earlier of: (i) the tenth
day (or such later date as may be determined by a majority of the Company's
Directors not affiliated with the acquiring person or group (the "Continuing
Directors")) after a person or group has acquired, or obtained the right to
acquire, beneficial ownership of 20% of more of the Company's outstanding Common
Stock or (ii) the tenth business day (or such later date as may be determined by
a majority of the Continuing Directors) following the consummation of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in beneficial ownership by a person or group
of 20% or more of the Company's outstanding Common Stock. If an acquiror obtains
20% or more of the Company's outstanding Common Stock (other than in certain
permitted transactions), and unless the Rights are earlier redeemed, the holder
of each unexercised Right will have the right to receive shares of the Company's
Common Stock having a value equal to two times the purchase price. Similarly,
unless the Rights are earlier redeemed, after the tenth day following certain
acquisition transactions, proper provision must be made so that holders of
Rights (other than those beneficially owned by an acquiring person, which will
thereafter be void) will thereafter have the right to receive, upon exercise,
shares of common stock of the acquiring company having a value equal to two
times the purchase price. The Rights Agreement has been amended so as to prevent
holders of the Series A-1 Preferred and the holders of the Series B Preferred
from being deemed acquiring persons under the Rights Agreement by virtue of
their beneficial ownership of securities issued or issuable in connection with
the sale and issuance of Preferred Stock. The Rights expire on July 25, 2005 or
on their earlier exchange, redemption or expiration in connection with certain
permitted transactions.
CERTAIN TRANSACTIONS
In June 1993, the Company made a loan in the principal amount of $150,000 to
Myron (Mike) Saranga, the Company's Senior Vice President, Product Management
and Development, in connection with his accepting employment by the Company. The
loan was originally due and payable in full on the earliest of June 2, 1995, the
date Mr. Saranga sold certain residential real property located in Connecticut,
or the date Mr. Saranga's employment with the Company was terminated. In June
1995, Mr. Saranga and the Company amended the loan to increase the interest rate
of 3.56% per annum to 6.55% per annum and to provide that $30,000 of principal,
and accrued interest, would be forgiven on June 2, 1996 and each anniversary
thereafter until the loan is no longer outstanding, provided that Mr. Saranga
remains an employee of the Company. The loan continues to provide that the full
amount of unpaid principal and accrued interest will become immediately due and
payable on the date Mr. Saranga's employment with the Company is terminated for
any reason. In June 1997 and June 1996, respectively, the Company forgave
$35,568 and $39,825 of principal and interest on the loan under the promissory
note, respectively (such forgiveness amounts were not grossed up to satisfy tax
obligations). As of March 31, 1997, outstanding principal under the note totaled
$90,000.
21
In April 1997, the Company entered into Separation Agreements with Ronald M.
Alvarez, the Company's former Vice President, American Sales, and Edwin C.
Winder, the Company's former Vice President, Japan Operations, in connection
with their resignations as executive officers of the Company. Under the terms of
their respective Separation Agreements, Mr. Alvarez and Mr. Winder received
payments for six months additional salary from the time of their resignations at
the rate of $17,083.33 and $18,250.00 per month, respectively. In addition, Mr.
Alvarez received a bonus in the amount of $7,686.00 for his services during the
Company's first fiscal quarter of 1997. As part of his Separation Agreement,
options to purchase 11,250 shares of Common Stock of the Company held by Mr.
Alvarez continued to vest during the six months subsequent to his resignation
date. The Company also agreed to pay both Mr. Alvarez and Mr. Winder additional
fees for outplacement services and legal fees incurred in connection with the
negotiation of their respective Separation Agreements.
In connection with D. Kenneth Coulter's resignation as Executive Vice
President, Worldwide Field Operations in July 1997, and pursuant to an
Employment Agreement the Company previously entered with Mr. Coulter, the
Company paid Mr. Coulter an aggregate of $106,954 over the five month period
ending December 31, 1997.
In January 1997, the Company made a loan in the principal amount of $150,000
to Alan Henricks, the Company's former Executive Vice President and Chief
Financial Officer, at an interest rate of seven percent (7.0%) per annum in
connection with his appointment as Chief Financial Officer. Under the terms of
the loan, $50,000 of principal would be forgiven on December 20 of each year
that Mr. Henricks remained an employee of the Company. In connection with Mr.
Henricks' resignation in April 1997, the Company entered into a Separation
Agreement with Mr. Henricks whereby the Company agreed to pay Mr. Henricks nine
months salary at a rate of $25,000.00 per month following his resignation. In
addition, Mr. Henricks agreed to repay the outstanding principal and interest
under the note in equal monthly installments of $17,156.00 through deductions
from Mr. Henricks' monthly severance payments described above.
In connection with David H. Stanley's resignation as Vice President, Legal
and Corporate Services, and General Counsel in October 1997, the Company entered
into a Separation Agreement with Mr. Stanley whereby the Company agreed to pay
Mr. Stanley six months salary at a rate of $16,666.67 per month following his
resignation. In addition, the Company agreed that unvested options to purchase
up to an aggregate of 150,000 shares of Common Stock of the Company held by Mr.
Stanley would continue to vest during a one month transition period. Under the
Separation Agreement the Company also agreed to pay Mr. Stanley up to $5,000 for
outplacement services.
The Company has made certain payments to Phillip E. White, the Company's
former Chairman, President and Chief Executive Officer in connection with his
resignation pursuant to the terms of an employment agreement between the Company
and Mr. White. See "Management--Employment Agreements and Change in Control
Arrangements."
On November 17, 1997, the Company issued 160,000 shares of Series A-1
Preferred and the Series A-1 Warrant in cancellation of and exchange for all of
the outstanding Series A Convertible Preferred Stock and the Series A Warrant
previously issued in connection with a Subscription Agreement, dated August 12,
1997, between Fletcher and the Company. The issuance of the Series A-1 Preferred
in exchange for the Series A Preferred was effected in reliance on the exemption
under Section 3(a)(9) of the Securities Act. On February 13, 1998, Fletcher
exercised the Series A-1 Warrant with respect to 60,000 shares of Series A-1
Preferred and simultaneously converted 220,000 shares of Series A-1 Preferred
into 12,769,908 shares of Common Stock.
In connection with the issuance of the Series B Preferred in November 1997,
the Company paid The Shemano Group, Inc. ("Shemano") a fee of $1,000,000 for
financial advisory services provided in connection with such financing. In
November 1997, the Company also issued Shemano 100,000 shares of its Common
Stock in connection with the financing. The Company also issued Shemano a
warrant in May
22
1998 to purchase up to an additional 50,000 shares of Common Stock because as of
May 15, 1998, the closing sales price of the Company's Common Stock was less
than $12.50 (the "Shemano Warrant"). The Shemano Warrant is exercisable
according to the same terms as the Series B Warrants. In February 1998, the
Company and Shemano entered into a letter agreement pursuant to which the
Company agreed to repurchase from Shemano the 100,000 shares of Common Stock
issued in connection with the issuance of the Series B Preferred. The repurchase
price would be determined based on the then-prevailing price on The Nasdaq Stock
Market and would be payable in cash. The Company's obligation to repurchase such
shares terminated upon the Commission declaring the registration statement
covering such shares and the shares purchasable upon exercise of the Shemano
Warrant effective on May 12, 1998.
Pursuant to both Article VI of the Company's Bylaws and Section 6 of the
Indemnification Agreement the Company enters into with its executive officers
and directors, the Company advances expenses incurred by indemnified parties in
connection with the investigation, defense, settlement or appeal of threatened,
pending or completed action or suits against such parties in their capacity as
an agent of the Company. Under both the Bylaws and the Indemnification
Agreement, the indemnified party will repay the Company for any advanced
expenses if it is ultimately determined that the indemnified party is not
entitled to be indemnified by the Company. As of March 31, 1998, the Company had
received invoices for legal fees of approximately $1,075,000 incurred by certain
of its current and former executive officers and/or directors in connection with
certain actions and suits alleging various violations of federal securities laws
and state corporate laws. As of March 31, 1998, the Company has advanced
approximately $540,000 in expenses to its current and former executive officers
and/or directors incurred in connection with such proceedings. The Company
anticipates advancing the remaining balance of such expenses in the near future.
23
COMPANY PERFORMANCE
NOTWITHSTANDING ANY STATEMENT TO THE CONTRARY IN ANY OF THE COMPANY'S
PREVIOUS OR FUTURE FILINGS WITH THE COMMISSION, THIS COMPANY PERFORMANCE GRAPH
IS NOT "SOLICITING MATERIAL," SHALL NOT BE DEEMED "FILED" WITH THE COMMISSION
AND SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS. The following
graph shows a five-year comparison of cumulative total return for the Company's
Common Stock through December 31, 1997 relative to the Nasdaq Stock Market Index
(US) and the Hambrecht & Quist Software Sector Index.
INFORMIX CORPORATION
H & Q COMPUTER SOFTWARE SECTOR INDEX
NASDAQ STOCK MARKET -- U.S. INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
H&Q COMPUTER NASDAQ STOCK
Informix Software Sector Market -U.S.
Dec-92 100.00 100.00 100.00
Dec-93 117.24 107.35 114.80
Dec-94 177.24 134.81 112.21
Dec-95 331.03 193.23 158.70
Dec-96 224.83 234.89 195.19
Dec-97 52.41 284.01 239.53
Assumes $100 invested on the last trading day of December 1992 at the
closing sales price in the Company's Common Stock, the Nasdaq Stock Market Index
(US) and the Hambrecht & Quist Software Sector Index. Total return assumes
reinvestment of dividends for the Nasdaq Stock Market Index (US) and the
Hambrecht & Quist Software Sector Index. The Company has never paid dividends on
its Common Stock and has no present plans to do so.
The Nasdaq Stock Market Index (US) was prepared by the Center for Research
in Security Prices and includes all United States Nasdaq Stock Market companies.
The H&Q Software Sector Index is a subset of the H&Q Technology Index and is
comprised of publicly traded stocks considered by H&Q as representative of the
software marketplace as a whole.
24
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG"),
independent accountants, to audit the financial statments of the Company for the
current fiscal year ending December 31, 1998. The Company expects that a
representative of KPMG will be present at the Annual Meeting, will have the
opportunity to make a statement if he of she desires to do so and will be
available to answer any appropriate questions.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On May 20, 1998, the Company filed a current report on Form 8-K (the "Form
8-K") regarding its dismissal of Ernst & Young LLP as its independent
accountants and the engagement of KPMG as the Company's independent accountants.
The contents of that report are as follows:
FORM 8-K FILED ON MAY 20, 1998
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
On May 12, 1998, the Company's Board of Directors approved a resolution (i)
to dismiss Ernst & Young LLP ("E&Y") as the Company's independent accountants,
effective upon management's notification of E&Y of the dismissal; and (ii)
concurrent with such notification, to engage KPMG Peat Marwick LLP ("KPMG") as
the Company's independent accountants upon such terms as may be negotiated by
management.
On May 13, 1998, the Company's management notified E&Y of the dismissal. On
May 19, 1998, the Company engaged KPMG as the Company's independent accountants.
E&Y's reports with respect to the Company's financial statements for the
fiscal years ended December 31, 1996 and 1997 did not contain an adverse opinion
or a disclaimer of opinion and were not qualified as to uncertainty, audit scope
or accounting principles.
In connection with the audits of the Company's financial statements for each
of the two fiscal years ended December 31, 1996 and 1997 and in the subsequent
interim period, except as described in the next paragraph, there were no
disagreements with E&Y on any matter of accounting principles or practices,
financial statement disclosure or auditing scope and procedures which, if not
resolved to the satisfaction of E&Y would have caused E&Y to make reference to
the matter in their report.
E&Y advised the Company that it disagreed with the Company's recognition of
revenue resulting from software license transactions with industrial
manufacturers which occurred during the first quarter ended March 31, 1998. The
disagreement was resolved to the satisfaction of E&Y with the result that
approximately $6.2 million in revenue has been deferred and will be recognized
over a period which the Company expects to be approximately two years. The
Company intends to file immediately an amendment to its quarterly report on Form
10-Q for the quarter ended March 31, 1998 to restate its financial results for
the period. The Audit Committee has discussed the accounting of these
transactions with management and E&Y.
The Company has authorized E&Y to respond fully to the inquiries of KPMG as
the successor independent accountants of the Company. Prior to accepting its
engagement as the Company's successor independent accountants, KPMG had the
opportunity to discuss with E&Y the subject matter of the disagreement described
above and other matters relevant to the Company. KPMG has not offered any report
or advice to the Company concerning such disagreement that was important to the
Company's decision in reaching a resolution.
25
During the Company's fiscal years ended December 31, 1996 and 1997, and
through March 31, 1998, the following reportable events occurred:
In connection with the restatement of the Company's financial statements for
fiscal years ended December 31, 1996, 1995 and 1994, and the quarter ended March
30, 1997, a number of conditions which collectively represented a material
weakness in the Company's internal accounting controls were identified. These
conditions included a deterioration in the Company's accounting controls at
corporate and regional management levels, and a relative failure to stress the
importance of these controls; an inappropriate level of influence, principally
by the sales organization, over the revenue recognition process; and an apparent
lack of clarity and consistent understanding within the Company of the
application of the Company's revenue recognition policies to large, complex
reseller license transactions. The Company is implementing a plan to strengthen
the Company's internal accounting controls. This plan includes updating the
Company's revenue recognition policies regarding accounting and reporting for
large, complex reseller license transactions, developing and conducting
educational programs to help implement such policies, changing the Company's
corporate and regional accounting and reporting structure and re-establishing an
internal audit function reporting to the Company's Board of Directors.
On April 29, 1998, E&Y informed the Audit Committee of the Board that it
considered that, in connection with the audit of the Company's fiscal 1997
consolidated financial statements, the lack of appropriate resources in the
accounting and controlling departments of the Company constituted a reportable
condition.
RESPONSE OF ERNST & YOUNG
On May 29, 1998 E&Y furnished the Company with the following response letter
concerning the information contained in the Form 8-K, which response letter the
Company filed with the Commission on Form 8-K/A on June 2, 1998.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read Item 4 of Form 8-K dated May 20, 1998, of Informix Corporation
and believe it is not complete as to reportable events as described in Item
304(a)(1)(v) of Regulation S-K. We believe the ninth paragraph of Item 4
included on page 3 therein should be replaced by the following two sentences. On
April 29, 1998, E&Y informed the Audit Committee of the Board that, in
connection with the audit of the Company's fiscal 1997 consolidated financial
statements, the lack of appropriate resources, analyses, and process structure
in the accounting and financial reporting departments of the Company resulted in
delays in closing the books, numerous and material amounts of post-closing
entries and audit adjustments required to be recorded by the Company, and
difficulty in accumulating accurate information necessary for financial
statement disclosure in a timely manner. E&Y considers this condition to be a
material weakness.
We are in agreement with the statements contained in the first sentence of
the second paragraph, the third paragraph, the fourth paragraph, the first
sentence of the fifth paragraph, the first part of the second sentence of the
fifth paragraph through and including the words "has been deferred", the fourth
sentence of the fifth paragraph as it relates to our Firm, the first sentence of
the sixth paragraph, the seventh paragraph, the first and second sentence of the
eighth paragraph, and the first sentence of the tenth paragraph on pages 2 and 3
therein. In addition, we have no basis to agree or disagree with other
statements of the registrant contained therein.
Regarding the registrant's statements concerning the lack of internal
controls to prepare financial statements, included in the eighth and ninth
paragraphs of Item 4 on page 2 and 3 therein, we had
26
considered such matters in determining the nature, timing and extent of
procedures performed in our audit of the registrant's consolidated financial
statements for the years ended December 31, 1997, 1996, 1995, and 1994.
/s/ Ernst & Young LLP
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative votes of the holders of a majority of the shares of Company
stock present or represented and voting at the Annual Meeting will be required
to approve this proposal. THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS
PROPOSAL AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP.
27
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the Annual Meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to mark, sign,
date, and return the accompanying proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose.
For the Board of Directors
INFORMIX CORPORATION
/s/ Gary Lloyd
Gary Lloyd
SECRETARY
Dated: June 15, 1998
28
DETACH HERE
PROXY
INFORMIX CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Finocchio, Jr. and Gary Lloyd
and either of them, as attorneys of the undersigned with full power of
substitution, to vote all shares of stock which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Informix Corporation, to be
held at the Hyatt Rickey's, 4219 El Camino Real, Palo Alto, California, on
Thursday, July 16, 1998 at 11:00 a.m., local time, and at any continuation or
adjournment thereof, with all the powers which the undersigned might have if
personally present at the meeting.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and Proxy Statement, dated June 15, 1998, and hereby expressly
revokes any and all proxies heretofore given or executed by the undersigned
with respect to the shares of stock represented by this Proxy and by filing
this Proxy with the Secretary of the Corporation, gives notice of such
revocation.
THIS PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
DETACH HERE
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
1. ELECTION OF CLASS II DIRECTORS:
NOMINEES: James L. Koch and Thomas A. McDonnell
FOR WITHHELD
/ / / /
/ / _______________________________________________
To withhold authority to vote for any individual
nominee, write that nominee's name on the line
above and mark the box.
2. To ratify the appointment of KPMG Peat Marwick LLP as the Corporation's
independent accountants for the 1998 fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the proxies are authorized to vote upon such other
matter(s) which may properly come before the meeting and any
adjournment(s) thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
THIS PROXY WILL BE VOTE AS DIRECTED, OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF CLASS II DIRECTORS AND
FOR THE RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT ACCOUNTANTS FOR THE 1998 FISCAL YEAR.
Please date and sign exactly as your name or names appear hereon. Corporate
or partnership proxies should be signed in full corporate or partnership name
by an authorized person. Persons signing in a fiduciary capacity should
indicate their full titles in such capacity. If shares are held by joint
tenants or as community property, both should sign.
Signature: ________________________________ Date: _______________
Signature: ________________________________ Date: _______________